Company Analysis: MLNMCompany Analysis: MLNM

Andrea HooperAndrea Hooper Imke EhlersImke Ehlers Rana SawayaRana Sawaya Carlos DedesmaCarlos Dedesma

Carlos

What Were Our Data What Were Our Data Sources?Sources?

Carlos

What are they Worth?What are they Worth?

IntroductionIntroduction AssetsAssets Some Product; Lots of PipelineSome Product; Lots of Pipeline AgreementsAgreements

Carlos

What are they Worth?What are they Worth?

IntroductionIntroduction AssetsAssets Some Product; Lots of PipelineSome Product; Lots of Pipeline AgreementsAgreements

Andrea

Founded 1993Founded 1993 Traded on Nasdaq since 1996Traded on Nasdaq since 1996 Currently 2,079 full-time employees Currently 2,079 full-time employees Major facilities:Major facilities: Cambridge, MA (HQ)Cambridge, MA (HQ)

Cambridge, EnglandCambridge, EnglandSouth San Francisco, CASouth San Francisco, CA

Website: www.mlnm.comWebsite: www.mlnm.com

IntroductionIntroduction

Andrea

Cambridge, MACambridge, MA: 1,040,211 sq ft building of offices and : 1,040,211 sq ft building of offices and lab space. Under lease.lab space. Under lease.

San FranSan Fran:136,000 sq ft of office and lab. Under lease.:136,000 sq ft of office and lab. Under lease.

EnglandEngland: 40,000 sq ft of office and lab. Under lease.: 40,000 sq ft of office and lab. Under lease.

Constructions:Constructions: Took occupancy of a 202,000 Took occupancy of a 202,000 square feet new office lab space in MA with a lease square feet new office lab space in MA with a lease until 2019. Another building next to it under until 2019. Another building next to it under construction with 214,000 square feet of office and lab construction with 214,000 square feet of office and lab space with lease til 2020. Move in Q3Q4 2K3. Also space with lease til 2020. Move in Q3Q4 2K3. Also 90,000 square foot building in England with move in Q2 90,000 square foot building in England with move in Q2 2K32K3

Introduction: Ample Lab SpaceIntroduction: Ample Lab Space

Andrea

Introduction: Management’s Control Introduction: Management’s Control over Expensesover Expenses

2002 2001 2000 1999 353,033 246,216 196,269 183,679

511,210 260% 400,575 204% 268,740 137% 159,877 81%

152,984 78% 82,663 42% 49,315 25% 32,896 17%

Costs and expenses: Research and development

Selling, general and administrative

FYE De c 31

Total revenues

Carlos

Introduction: Cheap Stock?Introduction: Cheap Stock?

MLNM RGN PFE

Mkt Cap (Billions) $2.4 $0.9 $183

Price/Book  0.83  6.15 9.66

Carlos

Introduction: Volatile Stock?Introduction: Volatile Stock?

MLNM RGN PFE

Mkt Cap (Billions) $2.4 $0.9 $183

Price/Book  0.83  6.15 9.66

Beta 1.65 1.02 0.60

Carlos

Introduction: Volatile Stock?Introduction: Volatile Stock?

Carlos

Introduction: Volatile Stock?Introduction: Volatile Stock?

Carlos

What are they Worth?What are they Worth?

Staff, Trade Name, Experience SetStaff, Trade Name, Experience Set AssetsAssets Some Product; Lots of PipelineSome Product; Lots of Pipeline AgreementsAgreements

Carlos

AssetsAssets

$1.8 Billion in cash $1.8 Billion in cash This is enough cash to meet this year’s This is enough cash to meet this year’s

operational & financing expensesoperational & financing expenses

Carlos

AssetsAssets

$1.8 Billion in cash $1.8 Billion in cash This is enough cash to meet this year’s This is enough cash to meet this year’s

operational & financing expensesoperational & financing expenses What about next year?What about next year?

Carlos

What are they Worth?What are they Worth?

Staff, Trade Name, Experience SetStaff, Trade Name, Experience Set AssetsAssets Some Product; Lots of PipelineSome Product; Lots of Pipeline AgreementsAgreements

Rana

Some Product; Lots of PipelineSome Product; Lots of Pipeline Cardiovascular DiseaseCardiovascular Disease

Product- INTEGRILIN (available)Product- INTEGRILIN (available) Pipeline- Phase I (3) / Phase II, III for Integrilin Pipeline- Phase I (3) / Phase II, III for Integrilin

CancerCancer Product- VELCADE Product- VELCADE Pipeline- Phase I (5) / Phase II, III for VelcadePipeline- Phase I (5) / Phase II, III for Velcade

InflammationInflammation Pipeline- Phase II (1) / Phase I (1)Pipeline- Phase II (1) / Phase I (1)

Metabolic disordersMetabolic disorders

Rana

Lots of PipelineLots of Pipeline• Cardiovascular Disease

• MLN519- proteosome inhibitor/ PAION Gmbh (P-II)• MLN01- monoclonal antibody (2 integrin)/ XOMA Ltd. (P-II)• MLN1021- Factor Xa inhibitor (P-I)• CAB-2- complement inhibitor / XOMA Ltd. (P-I and P-II)

• Cancer • MLN591RL- monoclonal antibody (prostate-PSMA)• MLN2704- monoclonal antibody (prostate-PSMA)• MLN576- topoisomerase inhibitor/ XENOVA (P-I and II)• MLN518- receptor tyrosine kinase inhibitor (P-I)• MLN944- samll molecule (solid tumor) / XENOVA (P-I and II)

• Inflammation • MLN02- monoclonal antibody (47) (inflammatory bowel

disease) (P-II) / Genentech (completion)• MLN1202- monoclonal antibody (rheumatoid arthritis)

• Metabolic disorders • Obesity and diabetes

Rana

Some ProductSome Product Cardiovascular Disease

• Product- INTEGRILIN (available)

Cancer• Product- VELCADE

Rana

Some Product: INTEGRILINSome Product: INTEGRILIN

Anti-platelet agent Platelet Glycoprotein (GP) IIb/IIa inhibitor Compound- Eptifibatide Cyclic heptapeptide/binds the KGD sequence on

receptor Highly selective for inhibiting ligand binding Administered as an injection, in conjunction with

plasminogen activators, oral regimens (aspirin) One of three anti-(GP) IIb/IIa inhibitor available

on market (concept in 70’s and 80’s)

Rana

Some Product: INTEGRILINSome Product: INTEGRILIN Developed/marketed by COR and Schering-

Plough Marketed in the US, EU, and 11 more countries Cleared for

management of patients with percutaneous coronary intervention (PCI) (angioplasty/ stenting)

acute coronary syndromes (ACS) (unstable angina/ heart attack)

Marketed in the US, EU, and 11 more countries Clinical trials in progress for added indications

Phase III- specific type of heart attack/pre-PCI Phase II- coronary artery bypass graft

Rana

Medically, INTEGRILIN is 2Medically, INTEGRILIN is 2ndnd Best of Best of Three ThreeReoPro > Integrilin > AggrastatReoPro > Integrilin > Aggrastat

ReoPro Integrilin Aggrastat (Abciximab) (Epifibatide) (Tirofiban)

Molecule Ab Fab Peptide Non-peptideBinding site Unknown KGD RGDBinding affinity High Moderate ModerateReceptor specificity No (sickle cell) Yes

YesFDA Approval PCI (#1) PCI,ACS ACSClinical studies renal,diabetic Sale price High Lower

Rana

INTEGRILIN Now Faces Targeted INTEGRILIN Now Faces Targeted Competition from Eli LillyCompetition from Eli Lilly

Imke

Conclusion:Conclusion:INTEGRILIN’s Sales for the next ~18 INTEGRILIN’s Sales for the next ~18

Months have PeakedMonths have Peaked

Rana

Novel drug candidate with broad applications in Novel drug candidate with broad applications in treatment of cancer treatment of cancer

In 2002 Velcade was granted “fast-track” statusIn 2002 Velcade was granted “fast-track” status In Jan 2003, the NDA filing was completed for relapsed In Jan 2003, the NDA filing was completed for relapsed

and multiple myelomaand multiple myeloma In Feb 2002 a MAA was submitted to the EMEA for In Feb 2002 a MAA was submitted to the EMEA for

marketing in the European Unionmarketing in the European Union

Some Product: VELCADESome Product: VELCADE

Rana

Phase III- APEX trial Patients with multiple myeloma- refractory after one or more

prior therapies 600 patients

Phase II- SUMMIT trial / CREST trial Patients with multiple myeloma- refractory after two or more

prior therapies Velcade (single agent) or in combination with dexamethasone (NDA based primarily on phase II trials)

Phase I and II- Velcade along with other drugs refractory colorectal cancer advanced non-small lung cancer blood malignancies other than multiple myeloma solid tumors- pancreatic, lung, breast, prostate, ovarian

VELCADE’s Possible Additional VELCADE’s Possible Additional IndicationsIndications

Rana

VELCADE’s Mode of ActionVELCADE’s Mode of Action Compound- Bortezomib for InjectionCompound- Bortezomib for Injection

Proteasome inhibitorProteasome inhibitor Dipeptide boronic acid analogues that inhibit the chymotryptic Dipeptide boronic acid analogues that inhibit the chymotryptic

activity of the proteasomeactivity of the proteasome Acts through multiple mechanisms to arrest tumor growth, tumor Acts through multiple mechanisms to arrest tumor growth, tumor

spread and angiogenesisspread and angiogenesis

Rana

VELCADE’s Mode of ActionVELCADE’s Mode of Action

Proteasome

IB

NF-B

Inhibitors of apoptosis adhesion molecules (metastasis) (angiogenesis)

Tumor growth

Proteasome Inhibitor

• Inducing apoptosis• Inhibiting metastasis and angiogenesis

Rana

VELCADE’s CompetitionVELCADE’s Competition

No other proteasome inhibitor on the marketNo other proteasome inhibitor on the market BUT, the competition for the indication includes:BUT, the competition for the indication includes:

ChemotherapyChemotherapy Traditional therapiesTraditional therapies Thalomid (thalidomide) (Celgene Corporation)Thalomid (thalidomide) (Celgene Corporation) Competitive therapies in late-stage clinical Competitive therapies in late-stage clinical

developmentdevelopment

Rana

What are they Worth?What are they Worth?

Staff, Trade Name, Experience SetStaff, Trade Name, Experience Set AssetsAssets Some Product; Lots of PipelineSome Product; Lots of Pipeline AgreementsAgreements

Imke

Agreements that generate revenueAgreements that generate revenue

Agreements as Sources of RevenueAgreements as Sources of Revenue BayerBayer AventisAventis Schering-PloughSchering-Plough ILEXILEX GenentechGenentech MonsantoMonsanto

Imke

Agreements that generate revenueAgreements that generate revenue1. Bayer

“multi-disease alliance” in finding targets for small molecule therapies and Bayer’s development and commercialization of resulting therapies

research part of alliance for 5yr term- completed in Oct.2003-extendable for 1yr at Bayer’s option

MLNM eligible to receive up to $465MM of which $387.4MM have been received up to Dec 2002; in 2002, this generated 22% of revenues

2. Aventis

“inflammatory disease broad agreement” from June 2000, for a 5 yr research phase

$250MM equity investment received, MLNM will receive royalty payments and enjoy access to Aventis’ promotional infrastructure in case of commercialization

“technology transfer agreement” from July 2000 over 3-5yrs. May be ended July 2003

Aventis is provided rights to MLNM drug discovery technologies in exchange for payments between $160-200MM over 3-5yrs . $97.8MM were received to date; in 2002, this generated 12% of revenues

Imke

Agreements that generate revenueAgreements that generate revenue3. Schering-Plough:

collaboration on Integrilin marketing; US profits: 50% ; international: SGP will pay royalties

4. ILEX

ILEX owns CAMPATH (humanized monoclonal Ab) for refractory CML. To date, MLNM has received $60MM from ILEX related to CAMPATH.

entitled to another $40MM in 2003 and 2004 if sales in the US meet thresholds. After 2004 entitled to further payments if sales meet thresholds in the US.

5. Genentech

collaboration for MLN 02 to target Crohn s disease from Dec.1997 to take it through Phase II after which Genentech will take over

option to share costs/profits or receive royalties and entitled to milestone payments

6. Monsanto

research alliance and technology transfer agreement with Monsanto, expired at end of its original 5yr term.

-MLNM may receive royalty payments in the future if lead target are developed into commercial products by Monsanto

Imke

Agreements as Liabilities:Agreements as Liabilities: BZL Biologics LLCBZL Biologics LLC XenovaXenova XOMAXOMA

Agreements requiring paymentsAgreements requiring payments

Imke

1. BZL Biologics

collaboration for joint dev. and commercialization of antibody-based therapeutics targeting PSMA from April 2001:

MLNM holds exclusive dev. and WW marketing rights to these products. (MLN2704/591R)

MLNM pays development and milestone and royalty payments to BZL based on product sales.

2. Xenova

agreement from 2001: for the dev. and exclusive North American commercialization rights to Xenova s DNA targeting program.

Initial payment from MLNM to Xenova $11.5MM. MLNM promised further milestone payments and royalties

3. XOMA

cardiovascular alliance since Nov. 2001

provides for the development of 2MLNM biotherapeutics by XOMA

MLNM pays milestone and royalty payments, and commercializes products after successful Phase II

Agreements requiring paymentsAgreements requiring payments

Imke

Summary & ConclusionsSummary & Conclusions Scary ThingsScary Things

Cash positionCash position Potential patent infringementPotential patent infringement Bayer may terminate relationship this yearBayer may terminate relationship this year Monsanto may terminate relationship this yearMonsanto may terminate relationship this year INTEGRILIN’s market share has probably INTEGRILIN’s market share has probably

peakedpeaked PositivesPositives

VELCADE looks promising and is VELCADE looks promising and is solelysolely owned by the companyowned by the company

Diverse product pipelineDiverse product pipeline

Carlos

Summary & Conclusions:Summary & Conclusions: We Recommend a HOLD Position We Recommend a HOLD Position

Although we like MLNM, we are Although we like MLNM, we are concerned with the large number of concerned with the large number of challenges that must be met in the next challenges that must be met in the next year in order to remain an on-going year in order to remain an on-going concern. concern.

We would like to monitor the company’s We would like to monitor the company’s operations and report back later this year. operations and report back later this year.

Carlos

ConclusionConclusion HOLD as we watch for certain goals to be HOLD as we watch for certain goals to be

met, met, File FDA application for VELCADE in multiple File FDA application for VELCADE in multiple

myelomamyeloma Complete enrollment for Phase III APEX Complete enrollment for Phase III APEX

Study of VELCADE in multiple myelomaStudy of VELCADE in multiple myeloma Initiate CABERNET trial of Integrilin in CABG Initiate CABERNET trial of Integrilin in CABG

surgerysurgery Initiate Phase II trials of VELCADE in solid Initiate Phase II trials of VELCADE in solid

tumors and NHLtumors and NHL

ConclusionConclusion HOLD as we watch for certain goals to be HOLD as we watch for certain goals to be

met (continued), met (continued), Initiate trials of Integrilin in combination with Initiate trials of Integrilin in combination with

drug eluting stentsdrug eluting stents Initiate trials of INTEGRILIN in combination Initiate trials of INTEGRILIN in combination

with direct thrombin inhibitorwith direct thrombin inhibitor Phase II results of MLNM 02 in ulcerative Phase II results of MLNM 02 in ulcerative

colitiescolities Initiate Phase II trial of MLNM-591 in prostate Initiate Phase II trial of MLNM-591 in prostate

cancercancer Enter 2-3 new molecules into clinical Enter 2-3 new molecules into clinical

developmentdevelopment

Mark J. Levin, 52 Chief Executive Officer since 1994President since 1993Founding CEO of Cell Genesys, Stem Cells, Tularik, Focal and Millennium

Vaughn M. Kailian, 58 Vice Chairperson since 2002Was President, CEO of COR Therapeutics 1990-2002

Kenneth M. Bate, 52 Senior VP & Chief Financial Officer since 2002

John "Jack" B. Douglas III, 49 Senior VP and General Counsel since 1999-2000

Linda K. Pine, 51 Senior Vice President, Human Resources since 1994

Robert I. Tepper, MD, 47 President, R & D since 2002At Millennium since 1994

Millennium Executive OfficersMillennium Executive Officers

Andrea

Julian Adams, PhDSenior Vice President of Drug Development and Discovery since 1999Used to work for LeukoSite before the mergerResponsible for discovery of VelcadeTM while at Proscript/LeukoSite

Clare MidgleyVice President of Global Corporate Affairs since 1997

Peter Smith, PhDSenior VP, Clinical Drug Development since 2000

Other Members of ManagementOther Members of Management

Andrea

Millenium BODMillenium BODEugene Cordes, Ph.D., Chairman of the Board, Concurrent Pharmaceuticals, Inc.

Shaun R. Coughlin, M.D., Ph.D, Director of the Cardiovascular Research Institute, University of California, San Francisco

Ginger L. Graham, Advisor to the President and Chief Executive Officer, Guidant Corporation

A. Grant Heidrich, III, Partner, Mayfield Fund

Charles J. Homcy, M.D., Senior Research & Development Advisor

Vaughn M. Kailian, Vice Chairperson, Millennium Pharmaceuticals, Inc.

Raju Kucherlapati, P.h.D, Scientific Director, Harvard-Partners Center for Genetics and Genomics, Professor of Genetics, Harvard Medical School

Eric Lander, Ph.D., Director, Whitehead/MIT Center for Genome Research

Mark J. Levin, Chief Executive Officer, Millennium Pharmaceuticals, Inc.

Edward D. Miller, M.D., Dean, Johns Hopkins University School of Medicine and Chief Executive Officer, Johns Hopkins Medicine

Norman C. Selby, Chief Executive Officer, TransForm Pharmaceuticals, Inc.

Kenneth E. Weg, Chairman, Clearview Projects, Inc. Principal, Clearview Global Venture PartnersAndrea

Fin

Carlos